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safeerkannamkurussi
Level 1

Service Invoice

When we create a name for service, Is there any way to make a particular Journal entry for the service name, means there should be COGS and some bank affects by selecting a name of service.

 

Example  When i create an invoice the entry for the service comes in this following way

Acc head             Name of account                                                                         Debit               Credit

 

current asset      cash/AR(received from customer)                                              153

current asset      bank(a deduction of amount from my bank acc)                                             153

 COGS                 Cost of goods sold                                                                         23

Income                Service Income                                                                                                        153

Current asset      Commission receivable from Government                                80

 

is there any way to make a service item in this way. When i select an item. These account heads should be affected.

Help me to solve this 

                             

1 Comment 1
qbteachmt
Level 15

Service Invoice

You need to avoid Journal Entries for everything here. You never use them for Names; not for Sales, not for AR, AP, QB Inventory, Sales Taxes, and not for Items. You would be bypassing all of that, and you are bypassing cash vs accrual basis reporting requirements, too.

 

You use Items because they flow data to the accounts for you; they allow you to set Cost, Price, and use Quantity. They can be two sided, so that you use it on the purchase transaction and for the sale, perhaps as directly Billable. Now you can run Financial reports and avoid micro-managing the chart of accounts; the best reference for the chart of accounts is the tax form this entity files. In the US, there is One Line for Income. But perhaps you offer different services and want to track them as these names, and also charge different prices depending on which service you provided. That is more Items, not more accounts. And you can make them Two Sided, to show you buy and sell that same thing. For Noninventory Item Types, they would typically be used for materials, and as two sided, the expense side is COGS and the income side is Income. For Services, the expense side might be Professional Services Expense or Subcontractor Labor, such as Electricians or Graphic Designers, as a service you incurred and charged back. Or, simply Sell, not needing Two Sided at all.

 

Sale Receipts = for this date, this sale also got paid.

Invoice = for this date, that sale is Unpaid, so the Unpaid amount is AR until the payment arrives and is processed as applied to that invoice. That also is AR = Receive Payment.

 

Your example of "cash/AR" is a mistake. This invoice is because cash is Not Yet Paid. AR is a type of asset; Bank is a type of asset. There is no Money yet, but you are entitled to be paid ("receivable") = AR is a different Asset than Cash.

 

The Service item is set up wrong, if you see it Credit Bank. That is typically Credit Sales. You list the charges, typically your Income activity. You seem to have jumped to the end = banking, overlooking Sales.

 

Or, you want, for example:

 

Invoice = Always the AR Debit (instead of a paid sales receipt, which would debit Bank).

 

What you list is Credits, when you use positive values. You don't Credit Bank on the invoice. That amount paid from your Bank would be done one a check expense, a banking transaction, with the Payee Name on it. Example:

In the US, a Law firm files paperwork on your behalf and that is not their Expense; it never hits the P&L. Paying one behalf of the client = Advanced Cost as other current asset. This is a Single-sided Other Charge item. They list it on the check to pay the court, Job Track that it is Billable to their client.

 

Then, they prepare the invoice for the client, listing the Billable charges (that way, it clears the Advanced Cost asset account) and they list their service fees as Income.

 

This is put on a sales receipt if the client is right there, paying. Or, an invoice, if this is to be Mailed or Emailed and paid later.

 

"is there any way to make a service item in this way"

 

It is not just One Thing. You described first, you Paid for something, that is on the expense from Banking. You track WHY you paid it, perhaps as expense or as asset that is billable to the client. Then, the charge to the client is typically Expense, but under certain conditions, it is repayment from an Asset you carried (none of this is Banking). The Law Firm that paid the filing fees has a Banking event; the reason they incurred a cost makes that cost an Asset to be reimbursed, because in the US, the law firm does not get to take Business Expense for client activities. That encourages them to file frivolous lawsuits to get more business expense.

 

So, the charges to the customer are activities on the Sale; selecting something you incurred as billable or not. And the Government Commission receivable, I don't see how that relates to this client sale. The Government owing you is its own Customer Activity, as well. If that is a holdback or reduction for the customer sale, fine. That would be Three Items:

Service for Income

Service or Other Charge for Advanced or what you Spent (not Bank, but reason)

and some sort of item for Government activity

 

Most times, what you bought is Expense, even if you charge that to customers as Revenue. The Reporting shows the net. Example:

I bought a replacement Computer for you, a custom order = two sided Noninventory item. This is linked to COGS and to Revenue. I enter it on the credit card charge that I used to buy it, as Billable to you. I select it for your invoice, along with my Service item for my time to set it up. And there might be sales taxes (credit to liability) also owed on this sale to you.

 

That is Your Invoice to pay me later. I have gross expense for the computer, two sources of revenue (my time and the computer charge to you) and the Sales Tax Liability to pay later.

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